India is not in doldrums by any comparison: Kaushik Basu

The government is blamed for policy inaction. Basu says, the government alone is not responsible for the growth slowdown. He expects reforms from the government in the next couple of months.

He believes that the government will re-notify foreign direct investment (FDI) in multi-brand retail. "FDI in multi-brand retail is likely in the next six months," he asserts.

He expects expect partial decontrol of diesel. “We have submitted advisory plan on partial decontrol of diesel,” he adds.

Also read: PM confident of leading India to 8-9% growth

Below is the edited transcript of his interview with CNBC-TV18’s Shereen Bhan. Also watch the accompanying videos.

Q: What happened yesterday with Fitch? S&P came out and said, ‘We are reviving India’s outlook to negative.’ Pretty much the same statement is coming from Fitch. The response from the government seems to be defensive. Once again it seems like the government is in denial mode. Everything is fine. But the fact of the matter is these are legitimate concerns. These are real concerns. These are concerns that Fitch, S&P and the rest of the world share about India. Isn’t it time for the government to come out and say we acknowledge these concerns and we are going to do something about them?

A: If you take the top spokespersons from the government, no one is taking a view that everything is fine.

Q: The statement comes out saying, 'Indian economy fundamentals strong and long-term story is strong.' You came out and said ‘herd mentality’. That’s the sense that we get.

A: Let me touch on all three. Fundamentals are very strong. Long-term story is intact. That’s the reason why we should feel bad that we are going through this phase and we need more action.

The ‘herd mentality’ statement is absolutely right. A forecaster looks at other forecasters. Rating agencies look at other rating agencies. So, we should not take the criticism of S&P’s and Fitch as making us twice as bad. It’s a reinforcement of the said statement that is being made. So, I think the ‘herd mentality’ is certainly there among rating agencies and S&P is the big one.

Q: When the government comes out and says the long-term story is good, but refuses to acknowledge the fact or atleast seems like it is refusing to acknowledge the fact that in the short and medium-term we have serious issues and we are not been able to garble with them. Moreover, there is a crisis of confidence and credibility because the government has come out and said, 'We want to cap oil subsidies, we want to bring down subsidy to 2% of GDP, we want to maintain the fiscal deficit to a certain number.' Yet we haven’t seen a credible roadmap. Hence, it is like the boy who cried wolf, nobody wants to believe what you are saying.

A: I feel I would be the first one to acknowledge the short run troubles. I have done that earlier that we are going through a difficult phase and I would not put everything at the doorstep of Europe or USA or the world. But, yes, I would not do that. I feel we have a certain amount of responsibility in terms of slowdown of reforms and slowdown of certain decisions making. Indeed that has played a role. But I think also there is a point of going overboard on the other side in criticising us. In the last quarter, India grew at 5.3%, Brazil at 0.7% and South Africa at 2.1%.

Q: In a relative world, we look better. I know that argument. I think the frustration stems from the fact that this was an economy that was poised to do 8% plus, if not go all the way to 9-10%. This is an economy that’s slowing down now to 6%. The consensus across the board is that if we do 6.5%, we are going to be very lucky. But frustration stems from the fact that this is only on account of the government not taking the actions that it ought to have taken.

A: No, it’s not only on that account. I have to dispute that. When you say that we know that relatively we are looking the same, it’s a very important statement. I will give you one more number. The economist magazine in the back pages, which is hard numbers, not analysis, they put out a forecast of 41 of the most important countries in the world. India is number two. It’s not just somewhere up there, we are number two behind China. Behind us is Indonesia and Thailand. So, in relative terms, we are not just holding on, we are doing very well. I am the first one to criticise our own policies, but we must not also go overboard in saying that everything is lost. That is not the case.